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Chairperson Keasila Jayawardena
GM and CEO Ajith Peiris
National Savings Bank (NSB) yesterday announced impressive performance for 2020 despite unprecedented challenges both for the organisation and the country.
It said the performance of the bank over the year was characterised by strength and resilience.
“Despite the heightened uncertainty due to the impact of COVID-19 which triggered a wide range of shocks on the bank, employees, customers and economy, our continued focus on financial resilience enabled us to remain strong and achieve a solid performance,” NSB said.
As one of the biggest lenders in the housing market in Sri Lanka, the bank facilitates the growth in national home ownership, opening a pathway towards economic security and mobility for hundreds of thousands of customers.
Beyond contributing to the General Treasury by way of taxes, levies, fees and dividends, and being the second largest holder of Government securities, the bank is one of the biggest lenders to the government and is an enthusiastic partner in the Government’s long-term infrastructure and socioeconomic development projects.
NSB Chairperson Keasila Jayawardena said: “While the figures demonstrate the solid performance of the bank, a deeper dive into the numbers must consider the context of the year.”
She said during the first wave of COVID-19 infection in late March 2020, the banking service was declared an essential service during the Covid-19 and the ensuing lock-downs, all the bank’s branches across the country were kept open to offer an uninterrupted service to our customers. The bank also allocated three mobile units to provide its customers with service at their doorstep.
The Government had responded with necessary measures to curb the spread of COVID-19. The bank also took part in implementing Government-led relief measures by providing the debt moratorium scheme aimed at supporting COVID-19 affected businesses and individuals. Accordingly, the moratorium has been given to 90% of the retail loan portfolio at the concessionary rate of 7.0% and the payments were deferred until the end of the loan period.
NSB General Manager and CEO Ajith Peiris said: “Total asset base of the bank grew by 17.8% to Rs. 1.4 trillion as at 31 December 2020 from Rs. 1.2 trillion as at 31 December 2019. The bank recorded its highest ever Profit Before Tax and Profit After Tax in 2020, both of which were aided by the Government’s stimulus initiatives introduced in late 2019.
“Against the backdrop of the COVID-19 impact on the economic activities, the bank’s Profit Before Tax was Rs. 15.6 billion, a 49.5% increase from Rs. 10.5 billion in 2019 and the bank’s Profit After Tax of Rs. 10.1 billion recorded a 58.4% increase from Rs. 6.4 billion in 2019. A dividend of Rs. 1.0 billion was paid for the financial year under review.
The bank reported a Gross Income of Rs. 127.5 billion for 2020, achieving a growth of 4.6% mainly driven by the 3.2% rise in Interest Income, the largest component, to Rs. 122.5 billion as well as Fee and Commission Income which has increased by 114.9% to Rs. 2.7 billion compared to last year.
The increase in interest income along with decrease in interest expenses resulted in 21.0% surge in Net Interest Income, rising to Rs. 34.9 billion in 2020 over 2019. Consequently, Net Interest Margin improved to 2.77% during the year from 2.63% reported a year ago.
The bank’s profitability was further enhanced by removal of the Nation Building Tax (NBT) and Debt Repayment Levy (DRL) on financial services and favourable changes to the deposit mix with the savings deposits to total deposits ratio increasing to 22.6% in 2020 from 21.5% in 2019, providing the bank with a source of low-cost funding.
The bank successfully improved its cost to income ratio (without taxes) to 39.1% in 2020 from the year 2019 through various cost savings strategies and initiatives. Nevertheless, the highest-ever profit was achieved after making an impairment provision of Rs. 4.9 billion, a 761.8% increase over 2019 reflected the elevated risk in the loan and advances portfolio and tenuous state of asset quality in the banking sector.
In 2020, the bank disbursed Rs. 31.4 billion in loans for infrastructure projects to State Owned Enterprises and the bank also positioned itself to finance further long-term projects in future through diversifying the bank’s sources of funding. The bank raised Rs. 5 billion through the issuance of a perpetual debenture. By enhancing the bank’s Additional Tier 1 capital, the bank is well positioned to increase its lending capacities for both Government and retail lending.
The retail lending portfolio increased significantly by the end of the December 2020, as the credit demand picked up during the fourth quarter following the Government’s COVID-19 Renaissance Facilities and policy interest rate cuts by the Central Bank of Sri Lanka (CBSL). Total Loans and Advances to increase by 13.7% to Rs. 516.8 billion as of December 2020, against the Rs. 454.4 billion recorded as at 31 December 2019.
The bank’s gross NPL ratio increased considerably by 122bps to 2.79% from 1.57% at end 2019 caused by adverse impact of the COVID-19 outbreak on the repayment capacity of the customers amidst the economic stimulus package introduced by the Government. Nevertheless, credit quality of the bank was maintained in a stable manner, having one of the lowest NPL ratios in the industry, in comparison to the industry average of 4.93% as at the end of 2020
The bank recorded its highest ever mobilisation of deposits by mobilising Rs. 221.9 billion during the year. The bank’s deposit base increased by 21.7% to record Rs. 1.2 trillion as of end December 2020, compared to Rs. 1.0 trillion reported as at 31 December 2019.
Despite the low interest rate regime that prevailed during the year, both savings deposits and fixed deposits bases recorded significant growths of 28.1% and 19.9% respectively to reach Rs. 280.0 billion and Rs. 957.1 billion respectively as at the end of December 2020 on the back of the increased household savings triggered by the pandemic.
The capital position of the bank remained strong and stood well above the revised minimum statutory requirements imposed by the regulator consequent to the COVID-19 pandemic. The Tier 1 Capital and Total Capital ratios stood at 13.65% and 16.45% respectively at the end of December 2020 well above the statutory requirements of 8.00% and 12.00% respectively. The leverage ratio of 6.64% too was well above the minimum requirement of 3.0%.
Peiris added that NSB “remains guided by our essential values and mission amidst the changes and challenges presented by the environment, while the shape of banking will change – and we will adapt to it – our responsibilities and our commitment to our purpose will remain steadfast”.
